[Good Morning Stock Market] "US Stocks Plunge Due to Inflationary Pressure... KOSPI Starts Down Around 1%"

The U.S. stock market closed lower amid concerns over the Federal Reserve's (Fed) hawkish tightening in response to rising inflationary pressures. The Dow Jones Industrial Average fell by 1.02%, the Standard & Poor's (S&P) 500 index dropped by 1.05%, and the Nasdaq declined by 1.69%. The dollar's strength and rising Treasury yields led to selling pressure mainly in technology stocks. However, considering that some of these concerns were anticipated through recent consumer price index data, the decline was limited as stocks digested the news individually, reflecting a controlled range of fluctuations. Strong consumer indicators also contributed to confidence in the economy.

[Image source=Reuters Yonhap News]

Sangyoung Seo, Head of Media Content at Mirae Asset Securities: "Weakness in Semiconductors and Tech Stocks Burdens Our Market"

On the 27th, the KOSPI is expected to start with a decline of around 1%. Last Friday, the Korean market opened higher amid the strength of the U.S. market but turned lower as selling pressure emerged due to concerns over the U.S. Personal Consumption Expenditures (PCE) price index. In particular, the weakness in major Chinese stock markets, driven by foreign selling, heightened U.S.-China tensions, and concerns over prolonged U.S. tightening, also weighed on the Korean market. Amid continued net selling by foreigners in both spot and futures markets, the KOSPI closed down 0.62%, and the KOSDAQ fell 0.56%.

The weakness in semiconductor and other technology stocks especially burdened the Korean market. The Philadelphia Semiconductor Index dropped 1.80%, and sectors such as electric vehicles and secondary batteries, including Tesla, showed weakness, which is expected to dampen investor sentiment toward large-cap stocks in the Korean market.

However, despite renewed inflationary pressures in the U.S., the positive outlook for the U.S. economy driven by increased consumption is a favorable factor. Furthermore, the U.S. market's tendency to show stable changes focused on individual stocks rather than broadening declines amid rising inflation is noteworthy. Considering this, the Korean market is expected to start with a decline of around 1%, mainly in large-cap stocks, followed by a process of digesting selling pressure on a stock-by-stock basis, resulting in limited volatility.

[Image source=Reuters Yonhap News]

Yumi Kim, Researcher at Kiwoom Securities: "Dollar Strength Returns Amid Renewed Inflation Concerns"

Following PCE inflation results that exceeded expectations, concerns over the Fed's intensified tightening have grown, leading to a forecast of renewed dollar strength against major currencies.

In January, U.S. personal income and consumption expenditures were reported better than the previous month, with the PCE price index rising 5.4% year-over-year, surpassing market expectations. The core PCE inflation also increased to 4.7% from 4.6% the previous month, reigniting inflation concerns. Consequently, fears of Fed tightening intensified again, causing the New York stock market to decline, increasing demand for safe-haven assets, and expanding dollar strength alongside rising Treasury yields.

Interest rates are also expected to rise due to inflation data exceeding forecasts. Although government bond yields fell after the Monetary Policy Committee meeting due to inflows, reflecting the previous day's decline in U.S. Treasury yields, they started strong and widened gains with institutional futures buying. While the Bank of Korea maintained a hawkish stance, the possibility of rate hikes has weakened amid downward revisions to inflation and growth forecasts.